The South Coast tourism industry came out swinging in the wake of the Great Recession and posted record numbers for 2012, but the momentum is expected to slow in the coming year.
That was the view of hospitality experts at the Santa Barbara County 2013 Travel Outlook. The event was held Nov. 6 at the Four Seasons Biltmore, a historic Montecito hotel that’s a part of the region’s luxury market, a sector that’s been a big part of the tourism comeback in the region over the last three years.
But the future isn’t looking quite as rosy as it has in the past. “2013 is not going to be as good as 2012. It’s not bad, but it’s at a plateau,” Bruce Baltin, a senior vice president at PKF Consulting USA who’s based in Los Angeles, said at the event, hosted by the Santa Barbara County Conference & Visitors Bureau. The title of his presentation, “The Road to Recovery Continues: Stepping on Uneven Ground,” reflected the consulting firm’s forecast for the regional hospitality industry.
Baltin said every sector of the Santa Barbara County tourism market reached a peak in 2012, with the luxury segment — which includes the Four Seasons Biltmore, Bacara Resort & Spa in Goleta, and Kimpton’s Canary Hotel downtown — leading the pack.
The good news is that since the tourism market hit rock bottom three years ago, the numbers have markedly improved. Dan Mishell of Visit California, the state’s tourism marketing agency, said the Golden State’s travel industry brought in more than $100 billion for the first time last year. Santa Barbara County’s hospitality sector brought in a record $1.6 billion, and it generated more than $100 million in state and local taxes for the county.
Hotel occupancy throughout the county reached 73.3 percent in 2012, the average daily room rate hit a record $181.06, and revenue per available room (more commonly known as RevPAR) increased year-over-year by almost 10 percent.
Since 2009, Santa Barbara County has seen upward trends across four key recovery indicators: there have been 11 quarters of consecutive increases for hotel room demand and occupancy and 10 quarters of consecutive gains for average daily room rate and RevPAR.
During his outlook, Baltin said he’s often asked why the nation’s hotels have done relatively well over 2010, 2011 and 2012, years that have hit other industries hard. The answer is that while GDP is growing at a tepid pace and the federal and state governments’ coffers are dwindling, two other segments of the economy are on the upswing — personal income levels are up, which means consumers have more discretionary money to spend on travel, and corporate profits have risen, which contributes to business travel and out-of-town conferences.
“The government doesn’t buy hotel rooms,” Baltin told the forecast’s attendees. “The components that are up are consumers and business, and those are the components that drive hotel rooms.”
But the region’s hoteliers shouldn’t count on rate and occupancy numbers to continue rising as fast as they did over the last year.
Mishell of Visit California said that while consumer confidence is improving, it’s still not nearly where it was a decade ago. He said that throughout the state, the tourism recovery is forecast to continue, but at a slower pace. The total number of visits to California was up 2.2 percent year-over-year in 2012, and that number is expected to come in at 1.9 percent for the coming year. “All the numbers are forecast to go down a bit next year,” Mishell said.
The South Coast hospitality sector is expected to see some big things in the coming year, changes that Baltin said could improve numbers in the long run. El Encanto, a historic luxury hotel set in Santa Barbara’s Riviera neighborhood, is set to reopen on March 18. Construction has started on La Entrada, the historic waterfront hotel project purchased last year by Los Angeles developers.
Chances of construction on the dilapidated Miramar property in Montecito starting again were higher, but Santa Barbara County’s talks with developer Rick Caruso over the so-called Hotel Incentive Program, which would reduce and delay taxes for certain hotel developers, have reportedly fallen through.
There is growth opportunity outside of the traditionally upscale Santa Barbara and Montecito markets, according to the PKF report. In the Santa Ynez Valley, for instance, many hotels are being renovated and rebranded to meet increasingly strong demand. And Goleta has the highest aggregate occupancy of any Santa Barbara County submarket, which is largely thanks to the presence of UC Santa Barbara and the high number of mid-market hotels catering to the university and the city’s tech community.
Although Santa Barbara is mostly a drive market, Baltin and Mishell recommended that hotels in the area also cater to international tourists because their stays tend to be longer and they spend more money.
Kathy Janega-Dykes, CEO of the visitor’s bureau, said the agency is already focusing on attracting international visitors, especially from China, which is forecast to become the No. 1 most-traveled market within five years.